Hayden Hamilton never planned to go into the business of selling pharmaceuticals. But when his brother and aunt lost their jobs and health insurance, and a close friend was diagnosed with Lou Gehrig's disease, he began a quest for affordable drugs.

While traveling with his friend to Asia to search for treatments, Hamilton discovered he could buy low-cost drugs made in plants certified by the U.S. Food and Drug Administration and send them to his family members. When he learned that India had the greatest number of FDA-approved manufacturing plants outside the United States, the seed of an idea was born.

The 31-year-old entrepreneur started ProgressiveRx, an Internet pharmaceutical seller, four years ago from his San Francisco apartment. Since then, his orders have increased from six to 1,000 per month.

The practice of importing unapproved drugs from other countries is technically illegal. But federal officials relaxed the rules in the late 1980s to accommodate AIDS patients and others seeking treatments not available in the United States. According to FDA guidelines, enforcement agents have discretion on whether to pursue individuals importing drugs for personal use, provided the supply does not exceed 90 days and patients can show they are under the care of a U.S. doctor. Hamilton said the company has managed to avoid hassles with the FDA by sticking to the 90-day rule and requiring prescriptions from a U.S. doctor.

No price controls

The popularity of services like ProgressiveRx reflects a growing market for alternative drug supplies amid a backdrop of soaring health costs. Americans typically pay the highest prices for brand-name drugs because, unlike Canada and many other countries, the United States does not impose price controls on pharmaceutical companies.

Hamilton's company is just one of hundreds of Internet pharmacies that have proliferated in recent years, sometimes offering discounts of more than 80 percent off U.S. brand-name drug prices.

Regardless of the legality, federal officials say buying drugs online from other countries is risky because customers may be getting fake, expired or adulterated medications.

But more Americans appear willing to take a calculated risk in the absence of prescription drug coverage.

"If the government doesn't get its act together, and with 47 million who are uninsured, there is a marketplace for alternative supply of some of these drugs," said Steven Findlay, managing editor of Consumer Reports Best Buy Drugs. "It raises all sorts of questions about how much trust you have from an alternative source, particularly with biotech and specialty drugs."

Some Web sites hawk controlled substances without a prescription or falsely purport to get drugs from a Canadian pharmacy or other more trustworthy source. While operators like Hamilton try to separate themselves from such operations, it's tough to tell the difference.

India has its share of problems with counterfeit drugs. The Times of India reported Wednesday that as much as 20 percent of the medicines sold in India is fake, and cited Organization for Economic Cooperation and Development statistics that say 75 percent of the world's bogus drugs originate in India.

FDA-approved

Hamilton, who holds an MBA from Oxford University and now works in his native Oregon, said he deals exclusively with FDA-approved manufacturers or those that meet the World Health Organization's guidelines to minimize risk of getting fake drugs.

He can't buy directly from Indian drug manufacturers, so he does the next best thing: He purchases drugs from Apollo Hospitals, Asia's largest health care provider, and a few other sources that buy their drugs from manufacturers he trusts. He said none of his company's 40,000 orders has been found to be counterfeit or adulterated.

ProgressiveRx, which is incorporated in Delaware because of favorable laws, is not licensed as a pharmacy in that state. Hamilton plans to open a retail pharmacy in Bangalore in early June, which will be licensed in India and eventually allow him to buy directly from manufacturers.

ProgressiveRx does not sell controlled substances such as Oxycontin, Valium or Vicodin, nor does it handle any medications - all orders are sent directly from India to customers for a $5 shipping fee. Hamilton said the drugs are sold at or slightly above cost to keep them affordable.

Hamilton said the company doesn't advertise and tries to keep a low profile. "We've just grown through word of mouth and tried not to slap anyone in the face with this. We just let people who tried it and are happy with it pass the word on to friends and family," he said.

Competitive business

While drugs prices offered by ProgressiveRx and other Internet sellers are low, they're not always cheaper than U.S. sources.

The United States has a highly competitive generics business, which makes some generic versions of popular drugs much cheaper than those in Canada and other countries. In addition, Wal-Mart expanded its $4 prescription drug program last week to sell 90-day supplies of many generic drugs for just $10. Rival Target is expected to follow suit.

One of Lipton's primary concerns about Internet pharmacies is that they generally lack the oversight of a pharmacist to identify potentially harmful drug interactions and address health concerns.

Kendra Martello, assistant general counsel for the Pharmaceutical Research and Manufacturers of America, said consumers may have other alternatives, including programs sponsored by pharmaceutical companies, to help them pay for their drugs. "There are other cheaper and safer alternative for patients to get legitimate, authentic medicines," she said.

No coverage for brand names

But not everyone qualifies for such programs. Kiana Keihani, a therapist from San Francisco, found ProgressiveRx while searching online for a way to afford Imitrex, a drug to treat her migraine headaches. Imitrex does not have a generic equivalent and her insurance does not cover brand-name drugs.

Keihani, who said she does meet income qualifications for pharmaceutical-assistance programs, said she is able to buy 30 tablets of Imitrex for $135 through ProgressiveRx - far cheaper than $250 for just a few tablets at a local pharmacy.

She realizes she's taking some risk. "I'm thankful it's something I can monitor. I can tell whether it's working or not," she said. "If it were something I couldn't, I would feel terribly vulnerable and frightened."

The controversy over importing drugs from other countries may become less of an issue after the presidential election considering the three major candidates all favor allowing Americans to purchase drugs from some countries with price controls.

Hamilton said he considers ProgressiveRx a stopgap solution.

"I would love to see us come out with a policy solution that would put us out of business," he said.

Are imports a bargain?

The following chart compares the prices of five retail pharmacies, including ProgressiveRx and Canadadrugs.com in Winnipeg, using five brand and generic drugs: Fosamax, which treats osteoporosis; cholesterol-lowering Lipitor; Tamoxifen, used to treat estrogen-sensitive breast cancer; Prozac, an antidepressant; and Plavix, a blood-thinning medication.

Drug

Costco

Drugstore.com

Canadadrugs.com

Wal-Mart

ProgressiveRx

Fosamax (10 mg)

$278.95 (100 pills)

$245.97 (90 pills)

$166.71 (84 tablets)

$172.36 (90 pills)*

$54 (90 pills)

Lipitor (20 mg)

$379.54 (100 pills)

$335.97(90 pills)

$164.34 (90 tablets)

$390 (90 pills)*

$88.20 (90 pills)

Tamoxifen (generic - 10 mg)

$25.66 (120 pills)

$44.41 (100 tablets)

$43.50 (90 tablets)

$24 (180 pills)

$50 (100 pills)

Prozac (generic - 10 mg)

$11.56 (100 pills)

$47.98 (90 pills)

$16 (100 pills)

$10 (90 pills)

$15.50 (90 pills)

Plavix (75 mg)

$455.39 (100 pills)

$389.96 (90 pills)

$332.52 (112 pills)

$500 (100 pills)*

$39.60 (120 pills)

* Prices quoted by Wal-Mart's Oakland location.

Source: Chronicle research.

Buyer beware

Federal officials warn that buying drugs from online sites is dangerous because the products might not be safe. A Web site that looks legitimate can be a front for an illegal operation. Anyone considering purchasing drugs online should make sure the Web site:

-- Is in the United States and licensed by the state board of pharmacy where the Web site is operating.

-- Requires a prescription from a doctor or other health professional who is licensed to prescribe medications.

-- Has a licensed pharmacist available to answer questions, along with a contact number for the Web site to call for problems or questions.